The author is a Forbes contributor. The opinions expressed are those of the writer.

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For years, China and Greece have had something special in common: A long cultural history that has helped shape the modern world. And from the late 1970s to this day, they shared something else -- a semi-Soviet economic model whereby a large part of the economy has been subject to the direct or indirect control of central and local government.

In both countries government has been present in utilities, telecom, transportation, and energy — as owner, financier, entrepreneur, and manager. This has resulted in keeping inefficient enterprises afloat, though more in China, where the government is the outright owner of State Owned Enterprises (SOEs), Town Village Enterprises (TVEs) -- producing goods as varied as steel, laundry powder, aluminum and toilet paper.

Government has also been present in the banking industry of both countries -- controlling almost every major bank, and rationing credit by political fiat rather than by market forces.

Bubbles (Photo credit: *Light Painting*)

The extensive presence of government in the economy -- and most notably the simultaneous government ownership of banks, pension funds, and common corporations – has created a peculiar situation whereby the creditor and the borrower are both owned by the government. And that’s a situation which increases and magnifies risks and uncertainties across the economy -- in two ways:

First, government ownership of banks gives rise to “abacus banking” -- bankers’ routine monitoring of money flow into and out banks merely fails to manage risks and uncertainties associated with conventional banking.

The result? Banks end up with piles of non-performing loans -- as I discussed in my book, The Rise And Fall Of Abacus Banking In Japan and China.

Second, simultaneous government ownership of both the creditors and the borrowers concentrates rather than disperses credit risks, creating the potential of a systemic collapse, as the Greek crisis demonstrated.

The reason why the “haircut” of Greek debt had such a pervasive impact on the Greek economy is that government-controlled banks and pension funds were the creditors of the general government and governmentally-owned corporations!

Things are even worse than Greece in China when it comes to the potential of a systemic risk crisis. Government-owned banks lend money directly to government owned corporations, which usually perform a great deal of welfare activities; and to land developers, who are behind the country’s property bubble, and the robust economic growth associated it.

Simply put, one arm of the government lends funds to another arm of the government, and everyone is happy, until someone must pay the bill. Then the situation turns ugly.

That’s what happened in Greece in 2011, when the country’s semi-Soviet model collapsed, taking down a large and corrupt government that lacked the resources to finance its multiple roles in the economy.

Now, think about the size of the Greek economy vis-à-vis the size of the Chinese economy. You can see why China’s financial crisis could be a Greek-style crisis on a grand scale. The only difference is that it may take longer -- much longer -- for such an event to take place, as China is the world’s second largest economy with its own currency rather than a tiny country within the Eurozone.